Veto Players, Globalization and the Redistributive Capacity of the State: A Panel Study of 15 OECD Countries

Abstract

Globalization is said to restrict severely the state's capacity to fulfill its welfare function in advanced industrial societies. This paper tests empirically the redistributive capacity of the state operationalized as the difference in percent of households who live below 50% of the median income in their respective country before taxes and transfers and after taxes and transfers, based on the latest Luxembourg Income Study data. Besides globalization, specific sets of domestic political institutions predictably and systematically affect the redistributive capacity of the state: what is termed ‘collective veto points’ buoy redistribution by the state, while ‘competitive veto points’ have the opposite effect. Partisan coloration is introduced as a control variable which, surprisingly, does not affect this critical function of the welfare state. The research design is a cross-sectionally dominant panel design (N=15, t=2). This study finds evidence that globalization and collective veto points both positively affect the redistributive capacity of the state while the converse is true for competitive veto points.